Abstract
ABSTRACT This paper revisits the relationship between human capital and income inequality, using an updated data set on human capital inequality and a novel database on earnings inequality. We find an inverted U-shaped relationship between these two inequality indicators, but with significant differences across countries regarding the turning point. Skill-biased technological change is found to be an additional force that may blur the relationship between human capital and earnings inequality. Over and above the effect exerted through earnings inequality, the paper shows that human capital inequality has a direct positive effect on income inequality.
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